AT&T's lagging iPhone sales cast doubts on Apple earnings

An iPhone 3G S waiting for "some time" to become activated on the AT&T Network. The company said it activated far fewer iPhones in its first quarter than it did in its fourth.

An iPhone 3G S waiting for "some time" to become activated on the AT&T Network. The company said it activated far fewer iPhones in its first quarter than it did in its fourth. (David Sarno / Los Angeles Times)

Tiffany Hsu

AT&T activated 3.3 million fewer iPhones in its first quarter compared with its fourth, a potentially concerning sign for Apple as the tech giant prepares to announce its own earnings later Tuesday.

AT&T said it activated 4.3 million of the smartphones, up from the 3.6 million activated in the first quarter of 2011. But that’s down significantly from the 7.6 million activated by the wireless carrier in the fourth quarter, after the iPhone 4S model launched.

Apple’s shares tumbled 2.5% midday, or $14.08, to $557.63 on the news, which came after Verizon said last week that it had activated just 3.2 million iPhones in its first quarter – a 24% drop. The two carriers account for more than 30% of all sales of the Apple smartphone.

Shares at AT&T, the country’s largest carrier, were up 4.1%, or $1.25, to $31.87.

AT&T’s income jumped to $3.6 billion, or 60 cents a share, from $3.4 billion, or 57 cents a share a year earlier. With fewer iPhone activations, AT&T shouldered less of a burden from Apple’s high initial subsidies for the smartphone.

But tablets such as the new iPad, not so much smartphones, had more influence on AT&T’s results.

While competitor Verizon added more than 500,000 wireless customers in its first quarter, AT&T said its post-paid wireless subscriber count – which measures customers who sign service contracts in exchange for a discounted device -- rose by just 187,000. Most of those were tablet customers, who pay much lessin feesthan their smartphone-owning counterparts.

The company sold 5.5 million smartphones – about 22% of them non-iPhones. The carrier is in the midst of a heavy advertising push for the Lumia 900 phone.